Mobile wallet wars: Bet on the established financial, billing players

Mobile wallet wars: Bet on the established financial, billing players

Summary: The mobile wallet game is getting interesting. We talk to Visa Mobile's Bill Gajda to get the lay of the land. Will trust trump brand?

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When it comes to mobile wallets, the dream is that consumers will use smartphones as their primary payment mechanism. You tap. You pay. These wallets will be so handy that all of your cards---Visa, Amex, Mastercard and loyalty clubs---will be stored in them.

With that promise---along with a bevy of payment friendly devices hitting the market over the next few years---there's an interesting battle brewing on the mobile wallet front. First, there are companies like Google that want to serve as your wallet. Apple, which has iTunes accounts and credit card numbers to leverage, will also be in on the festivities. And then there are players like PayPal, which will be the glue between brick-and-mortar and electronic commerce.

Meanwhile, banks, financial institutions and payment networks such as Visa, Discover, Mastercard and American Express will also be in on the act. The mobile carriers---AT&T, Verizon Wireless and T-Mobile are also reportedly investing $100 million into ISIS, a partnership that aims to create mobile wallets.

What side will win? My bet is on the established players. They have the leverage, consumer familiarity and trust already. More importantly, there are billing relationships. It's an interesting dance between these sides. As CNET News' Maggie Reardon noted, Visa and Google compete, but don't really acknowledge that they are rivals.

Nevertheless, tech players may get the press, but my wallet is likely to be stored with the same institutions I already have relationships with.

My mobile wallet pecking order goes like this.

  1. Banks (established relationships).
  2. Transaction networks (Visa, Amex etc).
  3. Companies that have your financial data already (mobile carriers, PayPal, Apple).
  4. Outsiders looking to disrupt (Google).

All of these wallets are likely to be open. From there, the game comes down to trust and brand.

With that backdrop in mind, we spoke with Bill Gajda, head of Visa Mobile, recently. Here's a look at the highlights of our conversation and my take:

Potential competition from startups and other tech players such as Google. Gajda said that the startups that he watches for partnerships and possible investments "innovate on the edge of the ecosystem." Disrupting a financial system that has been established for 50 years is difficult for startups. As result, the successful companies are likely to work with the system and innovate on the edge of that backbone. Square fits that profile, said Gajda.

My take: I agree with Gajda's view of the landscape even though Visa could be viewed as any incumbent that doesn't see the small fry coming. The reality is that it's tough to upend a well-honed financial system.

What about PayPal? Gajda considers PayPal a competitor and customer. "PayPal is a huge customer and a lot of those accounts are loaded via Visa," said Gajda. On the other hand, PayPal will compete at the retail point-of-sale terminal. Couldn't PayPal be a mobile wallet of choice? Sure, but scale matters argues Gajda and PayPal's 90 million or so accounts are dwarfed by Visa's 1.6 billion cards in the field.

My take: I see eBay and PayPal as more of a threat than Gajda. PayPal will have a different spin, but if the payment system does become a big option at the retail terminals Visa fees will suffer.

What's are the keys to the wallet wars? The biggest key is that wallets have to be open and offer functionality. Visa is looking to be a wallet player as well as be the network that operates in the background. Gajda also argues that trust matters a lot---consumers are likely to stick with the banks and financial partners they know.

My take: I agree with the trust argument. I'm not going to house my data with just anyone even if the security is top notch. I'd argue Google, Microsoft and any other tech provider will ultimately be on the outside looking in.

Is Near Field Communications (NFC) the enabler? Gajda said that NFC devices will be a key enabler for mobile wallets over the next two to three years. "There will be millions of devices with NFC," he said.

My take: Visa has dangled lots of carrots and sticks to get retailers on board with NFC at some point. I'd be more comfortable with a five-year timeline to mobile wallet utopia.

How's Visa's model going to evolve? Today, Visa is a transaction network, but going forward the company will provide real-time offers, alerts and other tools to consumers. Visa and Gap have teamed up for real-time coupons under a program dubbed Gap Mobile For You. With its network, Visa can see relevance---it knows where you are and what you bought---as well as fulfillment of an offer. Couple those items with location and Visa makes Groupon look like a blunt instrument swinging wildly as it hopes to land a consumer. Visa will either be a white-label provider of these services or be more outfront.

My take: Visa has the IT systems, visibility and network to be the go-to coupon and offer outlet. No one short of Amex, Discover and Mastercard can match the visibility and data Visa has on a customer.

What are the risks to the Visa as Groupon effort? Gajda noted that Visa has been more of a distributor and network provider than a business partner. That role has to change. Visa will be seen as both and enabler and a brands. "Mobile gets us closer to the consumer," said Gajda.

My take: The largest question here is what Visa means as a brand to consumers. We'll find out soon enough when Visa's mobile wallet lands. When it comes to brand, Google has more heft. I'd argue that financial transactions are different than an email account.

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Topics: Mobility, Banking, Enterprise Software

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25 comments
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  • RE: Mobile wallet wars: Bet on the established financial, billing players

    This is more a question of tech, and Visa doesn't exactly have much of a reputation there. Actually Visa apparently has no tech skills whatsoever for anything beyond the minimum needed for setting up basic credit and debit card transaction systems, so anything "innovative" they come up with will likely be both buggy and a massive security risk.
    JustCallMeBC
    • RE: Mobile wallet wars: Bet on the established financial, billing players

      @JustCallMeBC I am guessing you are unfamiliar with credit card transaction systems. If anything, the companies that know tech the best are financial institutions that know how to leverage tech and spend the necessary resources on R&D.
      Your Non Advocate
      • I wonder.....

        @facebook@...
        The majority of their tech has been processing out to a point of transaction. From that forward they have tradiitonaly left that to other groups. With NFC in phones I wonder if they have the resources or ability or will just partner.....
        rhonin
      • RE: Mobile wallet wars: Bet on the established financial, billing players

        @rhonin
        Check out http://stks.freshpatents.com/V-sym.php for a fairly dated article on Visa patents. Bear in mind that this list is dated, does not include any shared patents with partners or indirect holding companies.

        It is not just transaction level patents that they hold, but intellectual property on peer-to-peer payments, devices, and other areas related to electronic fund transfers.
        Your Non Advocate
      • RE: Mobile wallet wars: Bet on the established financial, billing players

        @facebook@... Like the big investment banks know best what's good for the financial industry? The only R&D they spend much time on lately is on modeling stock transactions on Vegas sports books, and coming up with faster systems to better outsnipe their competitors.<br><br>I haven't seen anything to indicate that Visa can operate out of its tried and true comfort zone. And this goes double with the Moe, Larry and Curly of communications tech: Verizon, AT&T, and T-Mobile (or is that just Moe and Larry now with AT&T taking over T-Mobile?)
        JustCallMeBC
      • RE: Mobile wallet wars: Bet on the established financial, billing players

        @facebook.... I just checked that list of recent patent applications by Visa -- I guess they decided to get into the patent troll business big time:

        "System and method for enrolling individuals in an automated payment plan"

        "Abstract: A system and method for enrolling check-writing customers in an automated payment program for paying recurring bills from a merchant with a financial presentation device (FPD) such as a debit or credit card instead of a check. An enrollment module receives a list of target customers that pay recurring bills by paper checks. An enrollment form is then sent out to the targeted customers. The enrollment form preferably requires minimal effort by the customer, for instance, requiring only a signature. Responsive to the enrollment forms that have been returned by the targeted customers which signify their desire to enroll in the automated payment program, the enrollment module receives a list of such customers. Based on the received list of customers, the enrollment module generates enrollment information which is sufficient to enable the merchant to enroll the customers in the automated payment program."

        Gawd....
        JustCallMeBC
    • RE: Mobile wallet wars: Bet on the established financial, billing players

      @JustCallMeBC And you have worked in what financial institution IT Dept? They workload and reliability they require...are you serious?
      ItsTheBottomLine
      • RE: Mobile wallet wars: Bet on the established financial, billing players

        @ItsTheBottomLine I'm mostly familiar with their security efforts, which blow. They have been utterly MIA in dealing with the European hacker groups. How do you suppose those FakeAV's were so successful with their scamware stuff when that whole dark business depended on credit card transactions? Visa, along with Mastercard, was completely useless in being helpful there, and transaction management is what they are all about.
        JustCallMeBC
  • RE: Mobile wallet wars: Bet on the established financial, billing players

    I don't trust the mobile payment systems. Just seems a bit too easy for some malicious person to get your info. Now on the back end I agree with your pecking order, its the front end with the phone and the readers I don't like.
    LoverockDavidson_-24231404894599612871915491754222
  • RE: Mobile wallet wars: Bet on the established financial, billing players

    Sounds like Google is planning on making an even bigger killing with targeted advertising. No thanks.
    kstap
  • Message has been deleted.

    JakeMathews
  • RE: Mobile wallet wars: Bet on the established financial, billing players

    I won't use the Google service... is it me or do they want to be everywhere??? geez
    Hasam1991
  • RE: Mobile wallet wars: Bet on the established financial, billing players

    Today, my butt makes phone calls. Do I really want it to start making purchases, too?
    PScooter63
  • RE: Mobile wallet wars: Bet on the established financial, billing players

    LOL, you trust Apple over Google.

    what a tool.
    Droid101
    • RE: Mobile wallet wars: Bet on the established financial, billing players

      @Droid101 No but I trust Visa/MC/AMEX WAY over Google and from what I read above majority of the people would as well.
      ItsTheBottomLine
    • RE: Mobile wallet wars: Bet on the established financial, billing players

      @Droid101

      Well at least Apple doenst sell you private information as google does
      SylvainT
  • Concerned

    I am not at all concerned with the NFC and the devices getting it right nor who is the driver going forward.

    I am very concerned with the POS infrastructure.
    Example: Well known gas station chain suing NFC in a device to "pay at the pump by waving your..."
    If the previous user had not completed their sale, when you waved your device, you automatically paid for their purchase.

    It is items/issues like these that concerns me more as this is adopted. :(
    rhonin
    • RE: Mobile wallet wars: Bet on the established financial, billing players

      @rhonin
      I don't see it just yet. I think it is a neat idea, but to me there are a lot of questions around the process for this to work and the security alone there are questions. It will be interesting to see.
      ItsTheBottomLine
  • I'd like to see

    Dwolla succeed. But I've not much doubt the greedy established institutions will win and find more ways to extort money from us
    winddrift03
  • RE: Mobile wallet wars: Bet on the established financial, billing players

    Expenses will increase. Convenience / security / low cost. Pick ONLY TWO. Like the cloud, this boondoggle will open doors to hacked and lost data and IDs. Insurance and operational costs will increase radically once the hackers get a handle on it.

    For cryin' out loud, RFID cards are bad enough.
    http://www.youtube.com/watch?v=vmajlKJlT3U
    notme403@...